In general, Switzerland pursues an open policy with regard to foreign (direct) investments. Switzerland has to date no general review or screening requirements nor a control system for cross-border foreign investments into Switzerland. Due to recent developments such as increased investments in Switzerland, the parliament mandated the Federal Council in spring 2020 to draft legislation to control foreign investments in Switzerland. The consultation on the draft Investment Screening Act ("Draft ISA") ended in September 2022. Due to the largely critical feedback against the Draft ISA, the Federal Council instructed the Federal Department of Economic Affairs, Education and Research ("EAER") to draft revised legislation by the end of 2023, which will further limit the screening to investments that are most critical for national security.

Currently, only limited specific foreign investment restrictions exist – de facto or de iure – in relation to certain industries, such as the financial industry, gambling, defense, aviation, nuclear energy and telecommunications.

For example, Switzerland adopted specific licensing requirements for foreign investors in the aviation and telecommunications sectors. Another example where Switzerland implemented a control system concerns the banking sector. Foreign investments in Swiss banks require approval from the Swiss Financial Market Supervisory Authority ("FINMA") if such an investment results in a Swiss bank being majority-controlled by a foreign investor.

The following acts or laws e.g. contain specific requirements for foreign investments:

• Swiss Federal Act on Telecommunications;
• Swiss Federal Act on Aviation;
• Swiss Federal Act on Banks and Savings Banks;
• Swiss Federal Law on Acquisition of Real Estate by Foreign Persons (Lex Koller).

The Swiss regime is focused on national security.

The Draft ISA defines a "foreign investor" as a person who intends to take over a domestic company. A person in this sense may be a company whose head office and main administration is located outside Switzerland, a company with assets that are controlled by one or more persons abroad or by another state or a natural person without Swiss citizenship who acts as a direct investor. Natural persons from EU/EFTA member states who intend to take over a domestic company in order to be able to pursue a self-employed activity in Switzerland on the basis of the Agreement on the Free Movement of Persons of 21 June 1999 or the Free Trade Agreement of 4 January 1960 are not considered foreign investors. Furthermore, the draft does not provide for any differences with regard to investments from specific countries. Rather, according to the revised draft, an investment review should be applied if a state-controlled foreign investor takes over a domestic company that is active in a particularly critical area, such as defense or health and telecommunications infrastructure. Please also see the response to "Do you expect any regulatory developments over the next 6 months?".

In addition, restrictions do apply to "foreign investors" or "foreign investments" in specific sectors. For example:

In the Swiss banking sector, a "foreign investor" is (i) a natural person intending to purchase a stake in a Swiss bank and who has neither Swiss citizenship nor a type C residence permit, nor (ii) a legal entity intending to purchase a stake in a Swiss bank that has its registered office outside Switzerland or is directly or indirectly controlled by a foreigner.

"Foreign control" is given if a foreign investor holds more than 50% of the voting rights or exerts a controlling influence in any other way. The transfer of such a controlling position in a Swiss bank to a foreign investor requires approval from FINMA prior to the acquisition's closing. FINMA's approval is subject to various requirements, e.g., reciprocity or adequate group supervision.

In the real estate sector, a "foreigner" or "foreign person" is (i) a natural person and a company who is resident or domiciled outside of Switzerland, (ii) natural persons who are resident in Switzerland but who are not citizens of an EU or EFTA member state, or do not have a type C residence permit, or (iii) Swiss domiciled company whose purpose is the holding of Swiss residential property and in which a person not resident in Switzerland has a controlling influence.

The purchase of Swiss residential property requires approval from the competent authority (designated by the canton (state) where the property is located). No approval is required with respect to the acquisition of industrial or business property. If approval is required, it must be requested by the respective purchaser prior to the acquisitions' closing.

There is no country-specific rule.

The Draft ISA regulates the approval requirement for takeovers. Under the current Draft ISA, takeovers of domestic companies by foreign investors must be approved by the State Secretariat for Economic Affairs ("SECO") prior to their execution if the takeover of domestic companies is carried out by a foreign investor who is directly or indirectly controlled by a state body. Acquisitions of domestic companies by a foreign investor are subject to approval if they (1) supply military equipment or provide services that are of decisive importance for the operational capability of the Swiss Armed Forces or other federal institutions responsible for state security, or (2) produce goods whose export is subject to authorization under the War Material Act of 13 December 1996 and the Goods Control Act of 13 December 1996. Furthermore, the following sectors are subject to investment screening: companies which (3) operate or own the domestic transmission network for electricity or distribution networks of network level 3 or lower with sales of at least 450 GWh/year, (4) operate or own domestic power stations or electricity production with a capacity of 100 MW or more, (5) operate or own domestic high-pressure natural gas pipelines, (6) supply water to more than 100,000 inhabitants in Switzerland, or (7) supply central security-relevant IT systems or provide such IT services for the domestic authorities.

According to the current Draft ISA, acquisitions of domestic companies by a foreign investor must be approved prior to their execution, provided that they have generated an average annual turnover of at least 100 million Swiss francs in the past two business years or, in the case of banks, gross earnings, if they are (a) university hospitals or general hospitals, (b) companies active in the field of research, development, production and distribution of medicinal products, medical devices, vaccines and personal medical protective equipment, (c) companies that operate or own central domestic hubs for the transport of goods and persons, namely ports, airports and transhipment facilities for combined transport of national importance in terms of transport policy, (4) companies that operate or own domestic railway infrastructures, (5) companies that operate or own central domestic food distribution centres (6) companies that operate or own domestic telecommunications networks, (7) companies that operate systemically important financial market infrastructures pursuant to Art. 25 para. 2 of the Financial Infrastructure Act of 19 June 2015, or (8) systemically important banks pursuant to Art. 8 para. 3 of the Banking Act of 8 November 1934.

Acquisitions of domestic companies are not subject to approval if they have had an average of less than 50 full-time positions in the past two business years and have generated an annual global turnover of less than 10 million Swiss francs.

The Draft ISA provides for a threshold of at least 100 million Swiss francs in annual turnover, or gross income in the case of banks, for a number of domestic companies, such as university hospitals or companies active in the research and development of medicinal products or medical devices.

Yes, according to the Draft ISA, the foreign investor must submit an application to the SECO prior to the execution of the acquisition.

For sector-specific approval, licensing or notification requirements, e.g. in the banking sector or real estate, see also our response to "Who is considered a "foreign investor" and are only investments from particular countries covered?"

Yes, according to the Draft ISA, the authority's approval of the takeover is required prior to execution.

According to a report, foreign direct investment in Switzerland increased in 2020 despite the COVID-19 pandemic. Foreign investment projects in Switzerland increased by 25%.

Please see responses to "Please provide a short summary of the Foreign Investment Restrictions adopted by your jurisdiction." and "Who is considered a "foreign investor" and are only investments from particular countries covered?"

According to the Draft ISA, the SECO will approve the takeover if there is no reason to assume that public order or security is endangered or threatened by the takeover. The authority takes into account in particular whether (a) the foreign investor is involved or has been involved in activities that are or have been detrimental to public order or security in Switzerland, (b) the foreign investor or its home state has attempted or is attempting to acquire information on the domestic company by means of espionage, (c) the foreign investor is or has been engaged in espionage, (d) sanctions have been imposed directly or indirectly on the foreign investor under the Embargo Act of 22 March 2002, (e) the services, products or infrastructure of the domestic company can be replaced within a reasonable period of time, (f) the foreign investor gains access to central security-relevant information or to data requiring special protection under the Data Protection Act of 19 June 1992 as a result of the takeover or (g) the takeover will result in a significant distortion of competition.

Furthermore, the foreign investor's willingness to cooperate with the authorities may be taken into account in the decision, subject to those cases in which the investor has the right to refuse to cooperate.

The approval of a takeover may be made subject to appropriate types of requirements or conditions, provided that this eliminates the threat or endangerment to public order or security.

According to a Federal Council media release dated May 10, 2023, the Draft ISA, is to be substantially revised and a new draft will be prepared by the end of the year. In particular, the revised draft is expected to provide that investment control only applies when a foreign state-controlled investor acquires a domestic company that operates in a particularly critical area. Examples include Defense equipment, power grids and production, or health and telecom infrastructure. This is intended to significantly reduce the adverse effects on companies compared with the draft that was sent out for consultation.